Are Most Admired Companies More Responsible?

Abstract

This study examines whether companies listed in Fortune’s ranking of the Most Admired (MA) Companies behave more responsibly compared to companies that are not on the list. Specifically, we investigate tax avoidance, environmental, social, and governance (ESG) practices, and financial reporting quality among the MA companies and a matched set of non-listed companies. We find that, compared to their counterparts, MA companies (1) exhibit higher cash and GAAP effective tax rates and smaller book-tax differences; (2) are more likely to be included in the 100 Best Corporate Citizens list, which recognizes firms for their superior ESG disclosure and performance; and (3) demonstrate more effective internal control and pay higher audit fees. Our study offers both research and practical implications by contributing to the literature on corporate reputation and social responsibility, and by guiding stakeholders who rely on the MA list to assess firms’ performance across a broad spectrum of socially responsible activities.